Introduction
In this age of technological advancement, there are not so many successful companies in the automobile market. BMW, one of the biggest vehicles and motorcycles manufacturers worldwide, is still playing such an important role in this era of innovation. It is interesting to analyse how BMW Group is operating in the global environment based on both internal and external factors.
As stated, BMW comprises three main brands: Rolls-Royce, Mini and BMW, it additionally offers innovative and financial services (BMW, 2018). Nowadays, BMW group is operating in 30 productions and assembly facilities located in 14 countries worldwide and has an International Sales Network consisting of 140 countries (BMW Group, 2018).
Regardless the economic crisis, BMW has performed well with a strong performance during the first three months of 2018 (Phys, 2018). German high-end automobile CEO has stated that several important strategic decisions have been brought in to help building a strong foundation for “more connected electric powered future cars” (The Business Times, 2018).
External Environment Analysis
PESTEL
PESTEL is a very recognized model that is always used to examine the external factors that could potentially impact the organization in the global environment (Johnson and Scholes, 2016).
Political AND Legal
The automobile industry currently has an opportunity to expand its market shares as the government are supporting foreign investors in a number of countries, particularly in Thailand, China and the UK (State Department Office, 2015).
Still, in some foreign markets, BMW could be impacted by the rise of bilateral free trade agreement. For instance, the bilateral agreement does not incorporate in the EU as to provide some superior benefits for the automobile industries in each own country, which this could lead to the outcomes that have significant influences on the BMW’s market share.
Economical
In comparison to the previous years, there has been a significant advancement in the global economy, which is estimated to rise 20% of the raw materials. Moreover, the globalized nations are also getting benefits from the world economic, particularly in the EU and in the US where the economics have grown by 2.5%. In addition, the positive development of economy in Japan and China has shown a growth in GDP by 1.8% and 6.9% consecutively in 2017.
Nonetheless, due to present incidence: Brexit, there has been a significant negotiation on business development on the UK’s economy, which has caused barriers in the training processes. In comparison to 2016, the GDP has fallen from 1.9% to 1.8%, and this has a huge impact on job losses which could show a result in currencies’ prices (Partington, 2018).
Social
Owing to the rise in worldwide market which is accounted to 3%, there is a rise in cars demand (Sturmer, 2017). This could be perceived as an opportunity for BMW, as the sales have increased to 2.8% in the first half of 2018 (Parker, 2018). In addition, there has been a rise in electrified cars which is a good prospect for BMW, as it is producing hybrid and electric vehicles which show an increase in sales accounting to 11,669 which is a rise of 62.3% (Auto Spies, 2017).
Nonetheless, with the fluctuation of economic condition and the consumer lifestyles that keep changing, the individuals are more interested to use public transportations, especially in some countries where traffic is really bad such as Thailand, Turkey and Mexico
Technological
Positive & Negative: Technological advancement can be seen as an opportunity but at the same time, it can also be seen as a threat for multinational organization. Technological advancements are potential to help reducing the emission of carbon dioxide, safety, and conservation of fuel. As a result, BMW could take this as an advantage to enhance the quality of product, for example, integration of electric model (Statista, 2018).
Similarly, digital channels can be used to promote the brand, and sustain the relationship with consumers through the customer service. Nevertheless, there are risks of making use of technology since the digital data is wirelessly transmitting, it is possible for the hacker to get access to those online data (Mintel, 2017).
Environmental
Positive & Negative: This period could be a good opportunity for BMW, as consumers are currently paying attention to the brands that are generating ecological cars. Furthermore, the global policy regarding the environmental issues has become very strict, all the organizations have to restrict the emission of greenhouse gases. Therefore, is it necessary for BMW to ensure that its manufacturing process do not harm the ecological system much.
Industry Analysis
Porter’s Five Forces
Porter's Five Forces is an analytical framework for exploring the competition of the business. It focuses on five important forces that could hypothetically establish the intensity of competition, and it could also be used to indicate the industry’s attractiveness on the basis of profitability (Lynch, 2012).
Competitive Rivalry (High)
In the premium automotive business, BMW is in a serious competition with other premium brands such as Mercedes Benz, Lexus, and Porsche. Therefore, it is important for BMW to produce cars that are distinctive and unique in every aspect including design, technology, and all the functions to help fulfilling customer expectations. Still, it is clear that competitive rivalry of BMW is a very high.
Bargaining Power of Suppliers (Low)
Even though there are numerous suppliers are in the automotive industry, they still have less bargaining power comparing to the premium automobile brands (Paolo, 2013); hence, they have a very low or do not even have a bargaining power for the raw materials. Besides, due to the very extreme switching cost in this business, it is to say that bargaining power of suppliers is quite low.
Bargaining Power of Buyer (High)
In this time of economic recession, it is quite easy for the customers to switch to other brands that they find more valuable. One thing to be considered while making a strategy plan is how much information can be delivered to the customers. Also, it is essential to maintain brand loyalty and relationship with customers (Do, 2016). In addition, the digital platform has become accessible for everyone, customers can search and compare similar products from different brands more easily; hence, the power of buyers are high.
Threat of New Entrants (Low)
To enter the luxury automobile market, one needs to invest a lot in both money asset and knowledge in manufacturing high-quality vehicles. It is correspondingly necessary to know how to reach customers and to persuade them to desert the long-known brands to try the newbie. Thus, it is not easy for the new entrants to enter the market, which causes the threat of new entrants to be low.
Threat of Substitutes (Medium)
As shown in the figure below, car and van have been the most popular choice for UK citizens still. However, public transportation can also be seen as a substitute for vehicles. Even if it does not provide the same level of convenience, there are still some exceptional advantages such as traffic or direction. Consequently, the threat of substitutes is medium.
Internal Analysis
4P
4P Model has been used to provide a deeper understanding on the internal environment of BMW.
People
As BMW values all the employees as the important foundation of its success, it always provides employees with comprehensive opportunities for qualification and personal development. For instance, BMW offers social benefits such as customized models for retirement, and accident and health insurance for employees (BMW Group, 2018).
Premise & Plant
As mentioned above, BMW Group is an international organization, it is operating in 30 production and assembly facilities locating in 14 countries around the world. It has established an International Sales Network comprising of 140 countries as well (BMW Group, 2018).
Process
It might be complicated to understand the process; thus, the value chain has been analyzed as shown below:
VRIO
SWOT
Strengths
BMW Group is a German carmaker who has been in this business for over the past 100 years, it has a very powerful brand reputation, a production networking, and dealerships all over the earth (BMW, 2018). It has always been launching the innovative technologies to capture attentions from the customers in the luxury car market.
Weaknesses
It is agreeable that a premium product is not affordable for everybody, BMW had undergone recalling its products as its cars were perceived as a harmful product to the environment and consumers (BBC News, 2018). According to Edison (2017), they had to continually make a high investment to maintain the quality of vehicle parts for they are very expensive.
Opportunities
In this green era, people are becoming more concerned about the environmental issues, it is true that this is a good opportunity for the carmakers to produce ecologically friendly products to fulfill those concerns. In comparison to the past, consumers these days have shown their interests more on hybrid vehicles (AFCC, 2018).
Threats
BMW does not have so many rivals. Audi and Mercedes are two examples of its direct competitors, since they both are famous and offering the similar products with BMW. Accordingly, it is possible for consumers to change their preferences towards those competitors if they find those alternatives offer more worthy products, BMW then has to always remain competitive.
TOWS
Conclusion
BMW has yet been able to maintain its top performance among the premium automobiles by its advanced technologies and unique designs, it is still crucial for BMW to always consider its competitors such as Mercedes Benz, Audi or other luxury brands. Innovative strategies and plans need to be invented in order to help BMW to retain as the best. In this age where the individuals value ecological products, BMW can take this opportunity to promote its electrified cars that directly respond the customers’ expectations. Since this technology is able to help reducing the causes of negative impacts on the globe, it can also help generating a sustainable attitude for green environment, for the better future for both BMW company and for all of humanity.